Author: Lara

Credit card can be essential these days. Instead of bringing cash, you can pay for your purchases using a credit card (and promise to pay them in full!). Apparently, not everyone can be given a credit card. Credit card companies are closely looking at your background and credit score to make sure that they will get paid no matter what happens. Some companies have even stricter requirements.

Still, this doesn’t mean you won’t be given a credit card. All you need to do is to ensure these three things to boost your chances of approval:

Have a stable source of income. 

This is a must. For credit card companies, it’s not enough that you have a job. What they need is a credit card holder whose income is both stable and steady.

How can you show that?

Your Overseas Employment Certificate (OEC) is enough proof since most overseas work requires two years. Present your employment contract as well since it will show how much you will earn every month. Presenting your remittances can also help you get a credit card approval.

If you have other sources of income such as business or earnings from your investment, then go ahead and present it. Credit card companies will appreciate that.

Open a deposit account.

 

It’s not just enough that you opened a deposit account. Credit card companies need to see that there is regular deposit going on in your account and preferably, with minimum withdrawal.

What you can do is to have a deposit account dedicated for remittances and another account, which could serve as your Emergency Fund. Present your Emergency Fund account since this is always increasing and with little withdrawal happening. Consequently, go beyond the maintaining balance through regular deposit. It is a sign of being financially responsible, which is a big plus. If you can, don’t go below P20,000. Don’t worry. You can do it.

Go for secured credit card. 

You have the option to prove yourself to credit card companies through your income and deposits. If you want the easier way, you can always go for a secured credit card. Mind you, this requires more money because a credit card company will require you to open an account (savings, checking, or time deposit account) and pledged deposit. This pledged deposit will serve as a guarantee for the credit card. The credit line will also depend on your deposits.

Whether you go for secured credit card or just the regular one, you will still be required to comply with the following:

• Between 21 and 65 years of age
• Billing statement reflecting your Philippine address
• Overseas Employment Certificate
• Certificate or Contract of Employment
• Work permit or work visa

Tips in finding the right credit card:

• Go for the bank where you course through your remittances. This will make it easier for you to get approved.
• Look for a credit card that you can use overseas.
• Compare annual fees. This could eat up your savings since some credit card companies charge higher annual fees. If you can go for free annual fee, then go for it.
• Ask for and compare credit card interest rates. There are instances when you won’t be able to pay in full (although this is not advisable!), and high interest rates can be heavy on your budget.
• Learn about the credit card’s special features such as reward points or rebate.

Despite the convenience and features, handling a credit card requires discipline and responsibility. Take it easy on credit card usage. If you use it, make sure you can pay in full. Remember that a credit card is not an extension of your salary. If you can’t afford to pay the item in cash, then it is best to leave your plastic card behind.

Let’s say you have a one million in your bank account. How do you plan to use it?

Shopping for your family might be the first thing on your mind, but have you ever considered investing it? Stocks or UITF is a good option, but what about having a business that your family can manage even if you are away? While this is a good idea, starting something from scratch can be overwhelming.

This is where franchising comes into play. Before you say yes to the idea, read this post first to help you decide if this is the right one for you.

What is franchising? 

Franchising is where an individual (like you) or small companies practice and use other people’s perfected business concept. In a franchising relationship, the franchisor or owner of the business concept gives the franchisee the right to use the brand, distribute and sell his products, and implement business techniques in exchange for a franchise fee.

The franchise fee is usually good for one to three years and can be renewed thereafter after payment of renewal fee.

Why franchise?

• Higher success rate – This is because a franchise is already a proven business model at minimal risk.
• Recognized brand – The target market is already identified and the brand is recognized by the public.
• Support is provided – Franchisors have perfected not just the business concept but also techniques and practices that will make the business model effective and profitable. Most franchisors also offer strategies and advice, which they can pass on to their franchisees. Training is also included to help you prepare on how to handle a business.
• Advertising is included – When you franchise, you also get to purchase, or at least have the right to use the franchisor’s advertising capabilities in order to market the brand. This is essential because most start-up entrepreneurs have no enough money to afford extensive advertising techniques.

In other words, you get to save time and your own money building a business since all you need to do is to follow the already proven business concept. There are no more trial and error, thereby reducing the risk and failure in handling a business.

Any risks or downsides of franchising? 

• No full control – You need to follow the business model and cannot divert from this anytime you want to. You also cannot easily introduce “gimmicks” to induce more customers, unless your franchisor allows you.
• Costs to maintain franchise privileges – Apart from the franchise fee that you have to pay, there are franchisors who require payment of additional fees such as royalty fees or a certain percentage from your monthly sales. There are also franchisors who require payment of advertising costs.
• Success is not guaranteed  – Yes, there is a proven business model, but once it is handed to you, it doesn’t mean you’re all set. The likelihood of success still remains in your own hands and in the amount of time and effort you put into it. Commitment is important, so you have to be prepared.

Despite the benefits of franchising, you still need to be ready since success is not automatic. You have to be prepared because a business is still a business.

Tips on How to Franchise:

1. Choose a franchise. Similar to starting your own business, find something that you are passionate about and suits you best. Identify the kind of product or service you want to offer, check your possible competition, and find out the franchisors offering such product or service you are eyeing for.

2. Go for a brand. Name recall is important in business. This will make it easier for you to market the franchise without paying for expensive advertising costs. Still, more is not always better since you might have a hard time penetrating the market.

3. Legitimacy is important. It is imperative that the franchise is registered with the Department of Trade and Industry (DTI). There are also legitimate franchise groups around, so check if your chosen franchisor is a member of one.

4. Look into the business model. This is important. You are buying the rights to use an established business model. Therefore, ask about support, research and development, and training schedules, and whether these are included in the business model.

Now that you finally decided to franchise, make sure you provide the following documents upon application:

• Franchising application form
• Letter of Intent to franchise
• Site location proposal
• Business documents like Business Name Registration (from DTI), barangay clearance, and business or Mayor’s permit
• Payment for Franchise fee, which varies per franchisor

With this information in mind, are you ready to get into franchising? Give it a try. Don’t worry. Balikbayad is here to help.

Debt – how much do you know about it?

For many, debt is evil. It restricts you, prevents you from growing your money, and leaves you under financial obligation for many years. Some even call it as “multo” because it haunts you even during your sleep. For others, debt can be good – as long as you used it for the right purpose.

So, what exactly is debt? What situations led you to being in debt?

Debt, defined. 

According to online website Investopedia, debt is the amount of money you borrowed from another person or entity. Individuals, small business, and even large corporations borrow money from banks or other lending entities to finance bigger purchases they can’t normally afford given the existing cashflow.

There are many kinds of debt:

• Credit card debt
• Consumer debt or money your borrowed to purchase or pay off items that depreciate or with no substantial resale value. Examples are buying a new phone or payment of medical expenses.
• Mortgage debt, which is secured by any type of asset such as house, car, or deposits.
• Investment debt or a type of financial obligation that you take in order to generate cash flow, free up funds, and build wealth. For instance, you borrow money to purchase stocks or renovate a property that you will put up for rent.
• Business debt, which is money you borrowed to start a business.

Regardless of the kind of debt, one thing is for sure: you will pay for a specific amount plus interest on a given date. In case you are unable to pay, the lender can foreclose the mortgages asset or worse, file a collection case against you and garnish whatever asset is under your name – which you don’t want to happen.

On a simpler level, why are you in debt? What attitude led you to being in debt?

Sources of Debt

Source No. 1: You spend tomorrow’s income today. 

“May sweldo naman sa katapusan,” you might say. In fact, you feel confident that you can get by every month because you know that you will get your salary. In case you fell short before the end of the month, you decided to borrow money since you can pay it by the 30th anyway.

That is a wrong mindset. Spending money you don’t have yet – even if you will get them at the end of the month – is the reason why you and many other people are in debt. Advancing tomorrow’s income is a big no-no.

Source No. 2: You and your family keep up too much with the trend.

 Many OFW families are guilty of this. Earning in dollars allows you to earn more, which means you can now afford the things you say no to before. Since you are away from your family, the way you could think of to make your presence felt is to send them things they asked you to buy.

What if you can no longer afford it? You take a second (or even third) job. Or you apply for a loan and promise to pay for it by the end of the month. See, it’s a never-ending cycle.

Source No. 3: Sudden change in lifestyle. 

This is in relation to source no. 2. The sudden change in lifestyle allows you and your family to live the life. Apparently, the problem lies when your contract ended and there is no immediate job waiting for you. The bigger problem is you and your family refuse to change your lifestyle and live simply. To afford the things you were used to, you resorted to borrowing – one of the bad reasons for getting a loan.

Source No. 4: You don’t have a defined long-term goals. 

Long-term goals are crucial in attaining financial freedom. It keeps you focused and grounded because you are saving up for something. You become more hardworking as well because you know that after all the sacrifices, you will be able to afford a new house or car. Without these long-term goals, you will continuously live in the present and not worry about the future. This creates a vicious cycle of borrowing and before you know it, you are buried in debt.

Every person in the planet wants to live a comfortable life – a decent place you can call your home, provide quality education for your kids, a stable job or business that provides sufficient money, and food on the table. If budget permits, it would be great if you have investments for added cashflow.

Still, all of these will be possible if you start building your wealth as early as now.

Here’s what you can do:

Step 1: Know your financial standing. 

This is the first step in building your wealth. Before you think about investment and retirement, you need to know where you are first, at least in terms of financial standing.

How can you do this? List down your assets, investments, and source/s of income. And then, divide them into two columns: passive and active income. Active income is something you are working hard for like your monthly income and side jobs. On the other hand, passive income means you don’t necessarily give your 100 percent attention but it is still income-generating. This includes investments (stocks, mutual fund, etc) or property for rent.

Once you established where you stand in the financial scale, it will be easier for you to identify what areas you need to focus on to build wealth.

Step No. 2: Determine your financial goals. 

This is another tricky part. You keep saying that you’ll work hard for your family to buy a house or earn at least a million, but how soon do you plan to achieve it?

To build wealth, it is imperative to determine and define your financial goals and keep it as specific as possible. In line with this, you need to establish how much money you are willing to risk for investment and other methods of income that could help boost your fund. You also need to decide how much percentage of your income are you willing to place in a fund. These tricks will help you determine your financial goals in a quantifiable manner.

Step No. 3: Learn to invest wisely. 

Do you really want to grow your money? Apparently, saving is just one of the many things you can do to build your wealth. You also need to consider investing because it helps increase your wealth.

There are many investment options available, so make sure you explore your options. You can also start for as low as P5,000 to P10,000, which is a good amount to experiment on.

READ: Investment Mistakes You Need to Avoid

Ask if you don’t understand anything since investment can be overwhelming especially for first timers. Avoid borrowing money for the sake of investing since it will take time for you to enjoy your investment and getting buried in debt is the last thing you need. More importantly, diversify. Don’t just limit on one investment option or one stock alone. You’ll never know what could happen, so better be safe and sure.

Step No. 4: Avoid committing financial mistakes.

 

To be able to build your wealth, you need to avoid these common financial mistakes:

• Living an extravagant lifestyle just because you are earning in dollars.
• Not setting aside a portion of your income for savings or emergency fund.
• Giving in to every demand of your family and relatives.
• Premature acquisition of assets or buying properties without clear and sure payment plan.
• Falling for investment scams.
• Practicing pasikat mentality.

Step No. 5: Be wise when borrowing money. 

Loans are not bad. In fact, there are situations where it’s okay to borrow money. It’s how you use the proceeds that puts borrowing in a negative light.

Therefore, be careful in submitting a loan application without thinking twice and evaluating the need for such loan. The purpose must be legitimate such as acquisition of property to be converted into an income-generating asset or to finance a start-up business for additional income. This way, even if you borrowed money, it will be compensated by the income you will earn from the business or property.

Speaking of loan, Balikbayad offers loan facility for OFWs to help you finance your cashflow needs. We understand your situation, which is why we are here to help and make borrowing easier and convenient for you.

Why do you want to work overseas? To earn more money? To provide a better future for your family? To help you pay the bills? OFWs will come up with hundreds of reasons on why they want to go overseas, but surely, you will find a common answer. One of them is to buy a house they can call their home.

The idea of owning a house is exciting. It also encourages you to work harder because of the goal you want to achieve. Apparently, owning a house is not that simple. You have to consider other options such as renting as you save for this house goal.

The question now is this: when should you rent first and when is the right time to buy a house? Read on to find out.

Rent if ….

• The rent is low and you can afford to pay for it every month.
• You still don’t have sufficient budget to buy your own house and cover all the expenses attached to it such as additional repair or renovation and buying furniture.
• You don’t have additional source of income that could help cover the expenses. Check out this post to see some of the side jobs you can do.
• There is no plan of retiring in that particular area and you can’t even commit to staying there for the next 10 years. This means you set a deadline for yourself and your family that you will only stay there for a maximum of five years, which is enough time to help you save for a new and own home.
• The place where your family in the Philippines is located is conveniently situated near establishments like school, market, and hospital. Again, the intention is only to live in that particular area for a short-term while saving up for your dream home.
• There is an intent to relocate and retire in the province.
• The responsible choice is to wait for a few more years because the cost of owning a house could leave you bankrupt, thereby jeopardizing the future of your family.

Buy if ….

• You have sufficient income stream that will cover the cost and expenses of buying a home. This means aside from the purchase price of the house and lot, you can also afford to pay new furnishings, appliances, and some minor repairs in your new home.
• You can afford and keep up with monthly amortization. Take note that this must be paid religiously every month, otherwise there is a risk that the property might be foreclosed and taken away from you.
• There is willingness to pay for real property taxes every year.
• There is an intention to live in a particular area for good.
• You and your family want to be in control of the home, with no landlord limiting you of what you can do in the house, which includes repainting the walls.
• Privacy and the comfort of your family is among the biggest considerations.

Here’s a tip:

Surely, you want a place you can call your own. To help you save money for your dream home, anticipate the costs that come with owning a new home. Add monthly amortization fee, insurance, property tax, and cost of maintenance, and then set aside an amount equivalent to or at least close to it every month. If possible, open an account specifically for it so you don’t have to use it. This gives you enough time to save up for the house while reducing the risk of availing for a Home Loan.

One of the basic things you need to do before you leave for overseas work is to open a bank account, preferably with remittance feature. This way, it will be easier for your to transfer money at the cheapest cost. Plus, you get to have a savings account as well, thereby making it easier for you to save.

Apparently, there are two types of deposit accounts: savings and current account. Learn about the difference between the two and find out the best one for you.

Savings Account

Savings account is the most common deposit account opened not just by OFWs but by many people. This type of account is often used to save and safekeep your hard-earned money to help meet both short- and long-term financial needs. You can also choose between passbook or ATM (or both, depending on the bank).

Advantages of Savings Account

The good thing about opening a savings account is that it is cheaper to open, with some banks allowing P500 to open an account. For OFWs, banks do not have initial deposit requirement (except for BDO, which requires you to deposit P100), which means you can easily and conveniently open an account.

Savings account is also cheaper to maintain, with a required maintaining balance of P2,000 or P3,000. If you plan to get a savings account with remittance facility, maintaining balance is waived by banks, which is an advantage for you since you get

READ: Savings Account for OFWs

Aside from this, savings account, whether a regular savings account or account intended for OFWs, has the ability to earn interest, which ranges from 0.1 to 1.5 percent, depending on the bank. It may not be that big compared to other investment options, but it’s better than nothing, don’t you think? Nonetheless, banks require a maintaining balance to earn interest, so it’s best to take note of that.

Disadvantages of Savings Account 

Apparently, there is a limitation imposed on savings account. Daily transaction limit is strictly imposed, so make sure to ask about it and take note of it.

Also, the medium of payment is limited when you have savings account. In fact, you are only allowed to use ATM or debit card (ideal when making purchases) and over-the-counter payments.

Checking Account

A current or checking account is a type of deposit account used to pay frequent money transactions like payment of tuition fee and bills. This type of account is also required to repay loans by issuing post-dated checks.

Advantages of Checking or Current Account

Having a checking account is ideal for payment of financial transactions since check payment is still the preferred method, especially in business. There is also no limitation as to how many checks you can issue and the amount you can withdraw from the account. Compared to cash, check is safer to carry around. There is also an overdraft facility, which is helpful in case of emergency and you have limited cash with you.

One of the biggest advantages of having a current account is it allows you to separate business transactions and expenses from your personal ones, especially if you have your own business.

Disadvantages of Current Account 

On the other hand, don’t expect to grow you money in checking accounts since this is typically zero interest. Some banks offer interest, but you need to meet their maintaining balance required to earn interest. It is also expensive to open and even more expensive to maintain since the required amount is minimum of P5,000.

You also have to be careful when issuing checks since bounced checks come with penalty fees and worse, imprisonment. It could also cause a negative effect on your credit score, so make sure not to issue checks when your account has low value.

Which one should you get? 

It depends on your needs and financial goals. If your aim to have an account dedicated for savings and remittance, then a savings account will do. In case you plan to put up a business, having a checking account is a must to facilitate transactions more conveniently.